Standards for Insecurity Acceleration Under Section 1-208 of the Uniform Commercial Code: A Proposal for Reform

This article examines in Part I how insecurity clauses function under the common law and the U.C.C .. Part II discusses the areas of controversy under section 1-208, the definition of good faith, the need for notice to the debtor, and the debtor’s burden of proof. The article will evaluate the need for substantive reform in each area of controversy. A two-tier test of the creditor’s insecurity is proposed wherein although the creditor has no responsibility to check the truth of his information, he may accelerate only if the information is true and is such as to make a reasonable creditor insecure.

Part III examines four avenues of substantive reform: redrafting the U.C.C. itself, reinterpretation of existing U.C.C. sections without redrafting, actions in equity, and actions through collateral state statutes. The article concludes that the best way to insure fair and uniform results is to redraft the text of section 1- 208 to include the two-tier test.